The Reserve Bank of Australia fine tuned monetary policy by cutting interest rates a further one quarter of a percentage point to a 49-year low, saying the economy is contracting, but at a slower pace than other major economies. Despite lowering its cash rate target to 3.00%, the central bank indicated a more neutral policy stance and said there are tentative signs of improvement in the world economy, including in China, Australia's largest trading partner. Governor Glenn Stevens signalled in his statement accompanying the rate cut that the RBA will proceed cautiously in coming months, making small adjustments to interest rates only if needed. "The Australian economy is contracting, though by less than those of its trading partners," said Governor Glenn Stevens in a statement. "There are tentative signs of stabilisation in several countries, including China, though it is too early yet to judge how durable these will prove to be," he said. By pushing the cash rate still lower, the RBA cut short a policy pause announced in March. The decision follows the admission last week by the RBA that the Australian economy is likely in recession. The central bank in its statement also noted that demand for credit is weak overall and demand for labour is weakening. Still, the RBA noted that there is significant stimulus on the way. "The stance of monetary policy, together with the substantial fiscal initiatives, will provide significant support to domestic demand over the period ahead," he said.